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Algonquin Power trustees announce common share for trust unit exchange

TORONTO, June 12 /CNW/ - The trustees of Algonquin Power Income Fund (the
"Fund") (TSX: APF.UN) announced today that they have entered into a unit-share
exchange support agreement (the "Agreement") to support an offer which will
provide the Fund's unitholders the opportunity to exchange their trust units
of the Fund, on a one-for-one basis, for the common shares of a corporation
("Algonquin Power Inc.").
"The Board of Trustees and the Manager believe that the conversion of our
unitholders' interests into shares of Algonquin Power Inc. is an important
element of the strategic initiatives announced last October, will
appropriately position Algonquin Power within the capital markets and will
increase Algonquin Power's competitive effectiveness in the power and utility
sectors." explained Ian Robertson, Executive Director of the Fund. "The
ability to reinvest future cash flows retained as a result of the increased
tax attributes available to Algonquin Power Inc. will support our growth
objectives." he continued.
In addition to the exchange of the Fund's trust units for shares, the
Agreement contemplates a proposal being made to holders of the Fund's existing
convertible debentures pursuant to which such convertible debentures can be
exchanged for convertible debentures or shares of Algonquin Power Inc. (the
"CD Exchange Offer"). Additional details related to the CD Exchange Offer were
announced in a separate press release dated June 11, 2009 titled "Algonquin
Power Trustees Announce Convertible Debenture Exchange").
Following completion of all the transactions contemplated by the
Agreement, unitholders can expect the following:
- Unitholders will receive common shares of Algonquin Power Inc. in
exchange for their trust units of the Fund, on a one-for-one
basis, and the shares of Algonquin Power Inc. will be listed for
trading on the Toronto Stock Exchange.
- Unitholders will continue to receive the same monthly dividend on
their Algonquin Power Inc. common shares as they would have received
as distributions on their units in the Fund (presently $0.24 per unit
annually).
- Excluding Algonquin Power Inc. shares that may be issued under the
CD Exchange Offer, the number of common shares of Algonquin Power
Inc. outstanding immediately after completion of the transactions
will be exactly the same as the number of Fund trust units
outstanding immediately before the transactions.
- Unitholders will hold shares in a dividend paying company rather than
units in a distribution paying trust; Canadian taxable shareholders
would be expected to benefit by paying lower income taxes on
dividends than taxes previously paid on distributions.
- The exchange of trust units for shares of Algonquin Power Inc. is
expected to be a tax deferred rollover for unitholders of the Fund
resident in Canada.
- Algonquin Power Inc. will have additional tax attributes of
approximately $192 million in addition to the existing tax attributes
of the Fund.
Rationale for and Benefits of Transactions
The Fund's long-term business strategy is to provide unitholders with
stable and growing returns through its ownership and operation of a
diversified portfolio of electric generation and utility distribution assets,
with a strong emphasis on renewable energy and sustainable infrastructure
investments. The Fund strives to deliver continuing growth through an
expanding pipeline of greenfield and expansion renewable power and clean
energy projects, organic growth within its regulated utilities and the pursuit
of accretive acquisition opportunities.
The Federal government's announcement and subsequent enactment of
legislation (the "SIFT Rules") regarding the taxation of income trusts on
October 31, 2006 along with the subsequent growth limitations placed on trusts
has made it more challenging for the Fund to execute its long-term strategy as
outlined above. Since the 2006 announcement, the Board of Trustees has
increasingly been of the opinion that the trust structure is no longer an
efficient structure for maximizing value to the Fund's unitholders. In
addition the Board of Trustees believes that the uncertainty relating to the
future of the public income trust market has resulted in discounted unit
prices, decreased access to capital, lower liquidity and constrained future
growth prospects given the limitations placed on growth of income trusts.
Consequently, the Fund's ability to fully execute its strategy has been
compromised. The Board of Trustees has been examining options available to it
to lessen the impact of the SIFT Rules and believes that an exchange of trust
units for shares of a corporation at this time as contemplated in the
Agreement prior to 2011 is beneficial to its unitholders.
Description of Transactions
The transactions contemplated by the Agreement involve a number of steps:
1. Pursuant to a plan of arrangement (the "Plan of Arrangement"), the
assets and liabilities of Hydrogenics Corporation ("Old Hydrogenics")
will be transferred to a newly formed corporation ("New Hydrogenics")
and the common shares of Old Hydrogenics will be redeemed for common
shares in New Hydrogenics. Following such redemption, the original
shareholders of Old Hydrogenics will have no interest in Old
Hydrogenics.
2. Promptly following the completion of the Plan of Arrangement, Old
Hydrogenics will be renamed Algonquin Power Inc.
3. Pursuant to a take-over bid offer (the "Exchange") and subsequent
compulsory acquisition, trust units of the Fund will be exchanged
simultaneously with the completion of the Plan of Arrangement for
common shares of Algonquin Power Inc., on a one-for-one basis.
4. Algonquin Power Inc. will have additional tax attributes of
approximately $192 million in excess of the existing tax attributes
of the Fund. Under the Agreement, immediately following closing of
the Exchange, Algonquin Power Inc. will pay New Hydrogenics
approximately $10 million.
Following completion of the above noted steps, unitholders of the Fund
will be shareholders of Algonquin Power Inc. and Algonquin Power Inc. will
hold 100% of the currently issued and outstanding trust units in the Fund. The
Fund will continue to exist in its current form as a trust owned by Algonquin
Power Inc.
The completion of the transactions contemplated by the Agreement will be
conditional upon, among other things, (a) regulatory and court approval and
the approval of the Plan of Arrangement by at least two-thirds of the
shareholders of Old Hydrogenics who vote on the arrangement, (b) approval by
at least two-thirds of Fund unitholders who vote on a special resolution
respecting the Agreement at the annual and special meeting of unitholders
which will be scheduled for July 27, 2009 (two-thirds of the votes cast at
such meeting being referred to as the "Exchange Threshold") and (c) Fund trust
units representing not less than the Exchange Threshold being validly
deposited under the Exchange. Complete details of the transactions
contemplated by the Agreement will be filed by the Fund on SEDAR
(www.sedar.com) under the Fund's profile.
BMO Capital Markets has been retained by the Board of Trustees of the
Fund to review the proposed terms of the CD Exchange Offers and provide
opinions as to the fairness, from a financial point of view, of the
consideration to be offered to holders of the Series 1 and Series 2
convertible debentures.
In addition, the Manager of the Fund has entered into an expense
re-imbursement agreement with Old Hydrogenics, which provides for the payment
by one party to the other of professional advisory costs and expenses incurred
in connection with the proposed transaction, to a maximum amount of $1,000,000
if the transactions contemplated in the Agreement fail to close under certain
circumstances.
The mailing of an information circular to the holders of Fund trust units
regarding the annual and special meeting of unitholders is expected in June
2009. The mailing of information regarding the Exchange and related matters is
expected in August 2009.
The Fund will hold a conference call on this matter at 10:00 a.m. eastern
time on Friday, June 12, 2009, hosted by Executive Directors of the Manager
Ian Robertson, Dave Kerr, Chris Jarratt, and Chief Financial Officer David
Bronicheski.
Conference call details are as follows:
Date: Friday, June 12, 2009
Start Time: 10:00 a.m. eastern
Phone Number: Toll free within North America: 1-800-731-6941 or local
416-644-3418.
Conference ID No.: 21308877
For those unable to attend the live call, a digital recording will be
available for replay two hours after the call by dialing 1-877-289-8525 or
416-640-1917 access code 21308877 followed by number sign from June 12, 2009
until June 19, 2009.
About Algonquin Power Income Fund
Algonquin Power Income Fund owns and operates a diverse portfolio of
approximately $1 billion of clean, renewable power generation and sustainable
utility infrastructure assets across North America. The Fund's generation
portfolio includes 42 renewable energy facilities and 11 thermal energy
facilities representing more than 400MW of installed capacity and the Fund
provides regulated utility services to more than 70,000 customers through its
portfolio of 18 water distribution and wastewater treatment utility companies.
Algonquin Power Income Fund's trust units and convertible debentures are
traded on the Toronto Stock Exchange under the symbols APF.UN, APF.DB &amp;
APF.DB.A. Visit Algonquin Power Income Fund on the web at
www.AlgonquinPower.com.
%SEDAR: 00009265E